1960s economists reframed stock options as rational and desirable despite Wall Street’s dismissal

Evidence

Among the contributors in the 1960s to the academic literature on options discussed in chapter 5 were the Princeton economists Burton Malkiel and Richard Quandt. They argued that options’ reputation as “the `black sheep’ of the securities field” was undeserved. Their use was “a very desirable strategy for most investors” and “wholly rational,” although the ad hoc New York options market was “relatively inefficient” (Malkiel and Quandt 1969, pp. 6, 163, 165, and 167). — Donald MacKenzie, An Engine, Not a Camera, 650

Categorization

• XREF: This is the performativity thesis in miniature: economic analysis reframing an instrument’s reputation. Links to how academic legitimization precedes market infrastructure creation throughout the book. — connects to: Options were once stigmatized securities but posed a tractable normal-science pricing problem — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 140; Pre-1970s options were stigmatized as speculation and market manipulation tools. — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 523; The Black-Scholes theory reframed options trading as legitimate efficient pricing rather than gambling. (+2 more)

Broader Connections

• The Black-Scholes theory reframed options trading as legitimate efficient pricing rather than gambling. #expands (0.95)
• Economists defended options by arguing they expand investors’ strategic repertoires #corroborates (0.85) — Donald MacKenzie, An Engine, Not a Camera, 665